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Why the CRTC’s pick-and-pay TV decision will lower cable bills

A sinister cloud has loomed over the CRTC’s months-long examination of how television is made and sold in Canada.

Whether it was during the Let’s Talk TV hearings last fall, where many Canadians said they wanted to be able to pay for only the channels they wanted, or the actual announcement of such rules, a spooky bogeyman has been invoked over and over. That evil spectre’s name: “higher bills.”

We’ve heard the cliché many times, and will likely hear it again in the weeks to come: be careful what you wish for, because you might just get it.

Some pundits and TV providers themselves have warned that introducing more choice and competition into the television market will be bad for consumers. Bundling crappy channels that no one wants with popular ones has kept prices down across the board, they’ve said. Meddle with that and bills will go up, because each individual channel will necessarily get more expensive.

In laying down some smart and logical rules that will go a long way to preventing that scary fate, the CRTC disagreed with such assessments. The regulator also painted the larger impact, with the supposedly widespread job losses that will result from those crappy channels folding, as exaggerations:

While models that attempt to forecast potential economic impacts provide useful insights regarding potential risks when exploring policy choices, the Commission is of the view that it must also consider the potential upsides of greater choice, including the retention of subscribers in the system, as well as the risks associated with maintaining the status quo in a context of increased demand for more choice.

Starting in March 2016, TV providers—known as Broadcast Distribution Undertakings, or BDUs, in regulatory parlance—will have to offer a “skinny basic” package of channels for no more than $25 a month.

These packages will have to contain local stations and mandatory channels such as APTN, CPAC, TVO and others, with the option of including U.S. networks such as ABC, NBC, CBS and FOX.

This is a big change from the entry-level services many TV providers currently offer. The cheapest available through Rogers and Bell in Ontario, for example, run around $40. Such packages contain more than 150 channels, but again, most of those are unlikely to be of interest to the majority of subscribers. [Rogers, which owns Canadian Business, has publicly supported the decision].

For people who want the most basic of services, bills will immediately and dramatically go down. (In settling on $25, by the way, the CRTC used retention discounts commonly given by the providers themselves as a guide.)

The bigger payoff for the larger populace will come in December 2016 at the latest, when all providers will have to offer channels on a pick-and-pay basis as well as smaller theme packs that are, to use the CRTC’s language, “affordable.” This could happen even sooner, with the federal government urging as much.

“While we understand that the CRTC feels the industry needs time to adjust to the new rules, we call on all industry players to deliver the choice to Canadians that they deserve in a timely manner,” Canadian Heritage Minister Shelly Glover said in a statement.

A couple of checks and balances exist or have been introduced to ensure that TV providers don’t jack up the cost of individual channels too high. For one, the CRTC is allowing subscribers to keep their existing packages if they like, which will prevent BDUs from making even more money off individual subscribers by forcing them onto a more expensive pick-and-pay system.

Then there is the average viewer’s natural predilection to choose only that which is of interest. For the canny consumer, this will mean some conscientious comparison shopping. Is Channel A worth $X, and is Channel B worthwhile if it only has, say, two desirable shows? Is it cheaper to get those two shows through other means, perhaps as a download from iTunes?

For people who really want to fine tune their viewing, such a system will undoubtedly save money. For those who can’t be bothered to sift through all that choice, smaller “affordable” theme packs may be the way to go. Again, the CRTC’s use of that word can be read into as further action could be taken if channels and packs are deemed not affordable.

Possibly the biggest new check on the system are the updated rules concerning wholesale.

Until now, any newcomer looking to offer TV service in a region had to go through the onerous process of getting a broadcast license.

The CRTC is now easing those rules by allowing newcomer companies with fewer than 20,000 subscribers to sell TV service without a license. It is also establishing a Wholesale Code that will lay out the rules under which broadcasters such as Bell-owned CTV and Shaw-owned Global must deal with new entrant TV providers. The rules will be finalized by September of this year.

This is big, because it gives smaller, independent internet providers such as Teksavvy and Distributel exactly what they were looking for. Bill Sandiford, president of the Canadian Network Operators Consortium—an affiliation of 37 smaller ISPs—says a number of new TV providers will sprout up as a result.

“This decision, once fully implemented, will go a long way to deliver more programming choice at lower cost to Canadian viewers,” he said in a release. “Canadian consumers are the true winners today.”

Having additional TV providers to choose from will certainly keep channel prices from the bigger players in check, the same way that indie ISPs have pressured monthly Internet usage limits upward.

The only question is how low will the indies be able to go? If prices go low enough, some Canadians who have “cut the cord” and cancelled their cable may be enticed to go back (I certainly would).

Even prior to the CRTC’s decision, some analysts were seeing pick-and-pay as a negative for the big TV providers. Desjardins Capital Markets analyst Maher Yaghi, for one, expected a reduction of $5 to $10 in monthly revenue per user “as customers get the option to choose the channels they want to watch and move discretionary money toward OTT (over-the-top) services such as Netflix.”

The CRTC’s wisely chosen checks and balances could make that forecast look conservative.

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